Janet Davies, general secretary of the Royal College of Nursing.
Photograph: Martin Godwin for the Observer

NHS workers will have had their pay cut by 12% by the end of the decade because of a government-imposed wage restraint that is now exacerbating chronic understaffing, new research reveals.

The 625,000 health service staff who earn at least £22,000 will have seen their income fall by 12% between 2010-11 and 2020-21 as a result of years of below-inflation 0% and 1% pay rises eroding their spending power, according to a report by the Health Foundation thinktank

The real-terms drop in pay will hit NHS personnel across the UK who are on band five or above in the service’s pay scales, which includes all 315,000 nurses. The Royal College of Nursing’s 270,000 members are currently being polled on whether they should strike – for the first time in their history – in protest at the government holding down their pay by limiting rises to 1% every year until 2020.

Staff salaries have already been cut by 6% since the coalition came to power in 2010, more than the 2% seen across the economy as a whole in that time, the report found. Midwives have seen their pay shrink by 6%, but doctors and health visitors have been hit by 8% and 12% drops respectively.

The Health Foundation also found that England could face a shortfall of 42,000 nurses by 2020, and almost half of all nurses believe that current staffing levels are already dangerously stretched.

Staff pay has fallen back so much that it is now causing major problems, the thinktank said. “The current phase of national NHS pay bill control began at a time of economic recession, with low inflation and high unemployment. However, this is increasingly being replaced by greater numbers of staff shortages and the likelihood of higher inflation.” It adds: “Having contained NHS staff earnings growth in recent years, UK governments now face a situation where recent trends and future projections highlight that earnings in the broader economy are growing more rapidly, and inflation is at a level that will erode the purchasing power of NHS staff.”

Thousands of nurses are projected to leave the profession. Photograph: David Sillitoe for the Observer

NHS pay caps have gone as far as they can, but are no longer sustainable and should be replaced, argued the thinktank: “The need for staffing growth, internal skills shortages, the search for productivity improvements, the ageing of the NHS workforce, and external labour market changes and unknowns – for example, the impact of Brexit on NHS staffing – all point to the need to better align the total reward package of NHS staff with organisational priorities.”

The likelihood of inflation being around 2-3% and workers generally receiving 3% pay rises means NHS staff’s earnings will continue to decline, the thinktank believes. “This means that NHS pay is likely to continue to reduce relative to both inflation and the wider economy over the period. Health unions said the findings vindicated their warnings that wage control had been applied for so long that it was prompting staff to quit and potential recruits to choose to pursue other careers.

“Nurses should not have to fund the NHS deficit from their own pay packets. Every year that the government holds NHS pay below inflation, hundreds of thousands of nurses get another real-terms cut to their salary. Too many are struggling to make ends meet, turning to food banks and hardship grants in desperation,” said Janet Davies, the RCN’s chief executive and general secretary.

The government pay cap is fuelling a recruitment and retention crisis that is also damaging patient care, she said. “A growing number feel they can no longer afford to work in the profession and others are deterred from joining by the meagre pay on offer.”

She called on Jeremy Hunt, the health secretary, to scrap the 1% pay cap that the government has already said it intends to impose on public-sector workers until 2020. The NHS has about 25,000 nursing vacancies lying unfilled across the UK, especially in hospitals, the RCN estimates.

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Anita Charlesworth, director of research and economics at the Health Foundation, said: “By 2019, people working for the NHS will have had their pay capped for nine consecutive years. The result is that earnings will have fallen by at least 12% over a decade when accounting for inflation. The NHS doesn’t have enough nurses and is struggling to retain staff. As earnings across the economy pick up, the government can’t continue to hold down pay indefinitely and secure the workforce the NHS needs.”

The Conservatives dismissed the findings. “We disagree with these figures. They speculate on future pay awards, which are based on independent recommendations. Investment in our NHS, in additional staff and indeed in their overall pay is founded on the strong economy only Theresa May and the Conservatives can provide,” a party spokesman said.